Balancing your short-term and long-term financial goals can be a challenge. There is only so much money to go around, and prioritizing where it goes can be stressful. One thing to remember is that consistent savings towards your goals are much more likely to prove successful than intermittent savings. Even if the money you are putting aside doesn’t seem like much, as long as you continue to do so, you will meet your goals.
Build Your Emergency Fund
The first step to making smart financial choices is to build up your emergency fund. There are a variety of reasons why this is important. Having an emergency fund allows you to pay for unexpected expenses. Without this money, you may have to do without or put the expense on your credit card. Your goal is to eventually have three to six months living expenses saved, however, even having $1000 tucked back in a high-yield savings account can create some breathing room in your budget.
Think About Your Goals
It is impossible to save effectively without a goal. You probably have several goals, and that is okay. The key is to prioritize them and then work toward funding each. One long-term goal that should never be ignored is retirement savings. If your company offers any matching for retirement, you should maximize that, if at all possible. Saving for your child’s education is also a concern for many people. The cost of college continues to rise, and the idea of paying fully for your child’s college education is a daunting thought for most people.
The good news is that there are many choices available to help your child pay for school. Your child may qualify for grants and scholarships that make their choice of schools more affordable. What is not covered by that and money that you have saved can be covered by private student loans. These loans allow your child to borrow what they need with favorable repayment options. Short-term goals, such as saving for a car or the down payment for a home, should also have a spot in your savings plan. If you are carrying any credit card debt, prioritize paying that off from some of the money earmarked for savings. Once the debt is paid off, you can redirect it to another category.
It is normal for priorities to change over time. Do not fall into such a routine with your budget that you don’t periodically take a look at your plans and reevaluate. Sometimes this happens for you. For example, if your car needs repair, hopefully, you can pay for that from your emergency fund. After you make the repair, however, you may want to take a look at your budget. Do you want to redirect some funds to repay the emergency fund quickly? Also, should you earmark some of your savings for a new vehicle down the line?
It is easy to feel like you are constantly being hit with unexpected expenses, but if you keep an eye on your budget, as well as what is going on around you, you will see things are more predictable than you may have assumed. HVAC systems need replacing and kids need braces. Life is full of expenses. Having a healthy savings account, with funds earmarked for both the expected and the unexpected, allows you to meet these challenges with minimal stress.